Given track records, it should be T-Mobile trying to buy Sprint
The rest of the landscape was a bunch of smaller carriers. There were larger regional carriers that had agreements to enable national service, like GTE, ALLTEL, AirTouch, Telecorp, Tritel, and US Cellular. Sprint had smaller operations before it built out its PCS spectrum.
The late 1990s brought rapid consolidation of the wireless sector in the US, BellSouth and SBC (who formed Cingular) bought AT&T Wireless forming the Cingular brand. Bell Atlantic, GTE, AirTouch, and PrimeCo merged to create Verizon and Verizon Wireless. Sprint would buy smaller carriers like 360 Communications, US Unwired and later Nextel.
Deutsche Telekom would lead the fray to create the T-Mobile brand in the US by acquiring VoiceStream, Omnipoint, Aerial, Powertel and SunCom assets, creating the fourth largest carrier in the US.
Sprint and T-Mobile have essentially been fighting over leftovers from Verizon and AT&T for several years. Only until recently, both carriers seemed to be in a permanent death spiral of subscriber losses. T-Mobile was finally able to reverse that trend by introducing truly radical changes in the way it does business and the rest of the industry has literally been playing catch-up ever since. It makes me scratch my head as to why Deutsche Telekom would be so eager to want to sell off what may be its only growth market.
In 2004, Sprint made the move to buy Nextel for $36 billion. The idea was that Sprint would find a way to merge the incompatible CDMA and iDEN wireless technologies, enabling push-to-talk connectivity no matter what and enhancing spectrum holdings in several markets. We know how that story ended, earlier this year, what was left of the Nextel network was shut down so the spectrum could be farmed for use on Sprints main services. Then there was the formation of Clearwire and the rush to bring “4G” to the market via WiMAX.
Three Words and One Word
Let us pretend for a moment that a merger between Sprint and T-Mobile is inevitable and the totally incompatible networks are not an issue. Given the track record between the two companies, who is better off running the show? Sprint’s CEO Dan Hesse has done a fine job of stemming the bleeding from Sprint given the difficult circumstances the carrier put itself in, but facts are facts, Sprint is not in a position to lead in any dance. Don’t believe me? I have three words for you: Nextel, Clearwire and WiMAX.
T-Mobile, by contrast, has been quite a bit more nimble and far more wise in its decision making process. Granted, the carrier remains smaller, but CEO John Legere in the 14 months he has been in that position, has almost literally turned the tables not just for itself, but for the entire industry in the United States. Sprint has no such claim, not by a long shot.
If I were Masayoshi Son, I would be quite concerned about forking over $20 billion more after digging out $20 billion just to get in the game in the first place. He should look not only at the effect the debt burden Sprint was carrying, but he should look very carefully at Sprint’s perfect track record of failure when it comes to working through incompatible network platforms. Nextel was a bust. Clearwire was a bust. WiMAX was a bust. Since I’m on a roll here, I’ll point out that the LightSquared deal was a bust too – granted, that one wasn’t really Sprint’s fault, but it shows an inability to pick a winner.
Forgive me for being a cynic, but a potential Sprint acquisition of T-Mobile looks like it could only have one outcome: disaster.
T-Mobile was also able to make the most of a difficult playing field, yes the AT&T break-up fee helped it, but in the grand scheme it was not a dump truck of goodies. It was $3 billion in cash, some spectrum and roaming agreements. No one can deny, 2013 was T-Mobile’s year.
The problem with Sprint taking on such an audacious plan is not the act of the merger itself, but the talent that would be running the show behind the scenes, and that should worry people, since it is perfectly reasonable to expect that mindset and talent pool still exists to some extent within Sprint. When the skeletons of Nextel, Clearwire and the flawed rollout of WiMAX are not even hiding in a closet, Masayoshi Son might want to take a moment to reflect on that and gauge if the money and time is well spent.
It's How You Use It
If Son wants to see an early return on his investment, let SoftBank sell off some of its stake in Sprint, allow SoftBank be a 45% (or 49.9%) holder while T-Mobile takes over 55% (or 50.1%), not unlike the initial Verizon/Vodafone arrangement and bring John Legere’s dynamic leadership to the front of the line. If debt concerns and break-up fees are already causing consternation about a takeover of T-Mobile, then that means it is already time to push away from the table, call it a day, and get to work on Sprint’s new strategy. Anything else is a distraction.